Some business owners may view selling their product through a major retailer such as Office Depot as the epitome of success, but not Jim Kandrac, president of Altatech-Direct.com.
When Kandrac founded the furniture manufacturing and supplies company, he looked past the prestige of big-box retailers to cyberspace, taking the road often deserted these days.
The move paid off -- Altatech has achieved $6.5 million in annual sales while its Internet cousins continue to drop by the wayside. It's done so by responding to the market and understanding its core strengths.
Laying the foundation
In 1987, Kandrac left a Cleveland-based computer leasing company to start a computer hardware business, United Computer Group. Around 1996, hardware became a commodity product as prices dropped and access to equipment increased.
Sensing the shift, Kandrac turned his attention to other ways for UCG to provide value to its customer base of small- to mid-sized manufacturing and distribution companies.
He saw a need for systems packages, such as manufacturing distribution systems, customer relationship management, business intelligence enterprise solutions and Web-enablement programs. The market proved him right. Over the last 14 years, UCG has evolved into a solutions-driven complete systems provider, with 20 employees juggling more than 500 accounts.
A favor yields a company
Initiating a computer furniture business in 1996 was a whim, an afterthought.
"Some of our larger customers had asked for better quality computer furniture. ... There were a lot of press board (products) ... so I started looking at it," Kandrac says.
At first, products were imported from Europe for resale. This was around the time that the number of office superstores was exploding -- Furniture Max stores were opening next to their sister division, Office Max, and Office Depot was starting a furniture retail chain in major cities nationwide.
What started as a favor for key clients developed into a business as Altatech captured superstore sales in the United States. Its Web site was originally viewed as a customer convenience rather than a market strategy, but when Kandrac saw how the middleman pulled profits out and kept Kandrac's profit margins low, he sought other opportunities.
The big one arrived when a manufacturer in Mexico approached him. Kandrac saw a strategic advantage. That relationship opened the door to selling the product in Mexican superstore chains and drastically decreased supply costs.
Leaving the bricks and mortar
After two-and-a-half years, Kandrac rewrote his American business plan to reflect a new strategy -- go direct via the Internet. An analysis revealed that even the manufacturing partnership could not eliminate the drain on revenue.
From co-op advertising, product returns and questionable risk factor percentages, Kandrac says there was no way for Altatech -- or any company -- to be truly competitive with its products in U.S.-based big-box retailers.
Kandrac recalls saying, "Wait a minute, wake up here. Let's apply what we do on daily basis for our clients (of UCG)." He decided to pull out of commercial retail and move solely into the Internet arena.
Altatech has grown 300 percent since then, proving that understanding the market and capitalizing on change are still business standards to live by.
"By us coming to that decision and going direct, we have more control over our business, and our profit margins are triple," Kandrac says. "We do less sales overall, but they're much more profitable."
UCG funded the business model that includes container-load shipments from the manufacturer Mexico to an Ohio-based warehouse for national distribution.
Surviving the Great Shakeout
Altatech not only survived 2000, it flourished while competitors and other Internet retailers did not. How?
By tapping into the global marketplace. Altatech's sales are processed through a Web-enabled order entry program and soon-to-be-online live interactive order confirmation system. International sales originate from Brazil, Chile and Argentina. Those countries, as well as Russia, Spain, Taiwan, Germany, Italy and France, are targets for future corporate partnerships. Kandrac expects to have selected international partners established by the end of 2001
Back home, the American market revealed growth in the expansion of training and call centers, so Altatech targets multisite national and international customers that include the U.S. Marine Corps.
Kandrac believes diversification with global sales takes some of the risk out of the fluctuating local economy.
"I know long term we don't want to be completely dependent upon our marketplace," he says.
Kandrac admits challenges lie ahead. From finding low-cost packaging for long distance shipments to establishing safe financial transactions methods, expansion into the global market holds risks. But, he says, "If it were easy to do, everybody would be doing it." How to reach: Altatech-Direct.com, (440) 717-7655